CHINA - Hot pork prices are stirring up gripes around China's dinner tables as well as concerns that the trend, if it continues, may derail the country's easing monetary policy stance.
In July, pork prices, up 16.7 per cent on one year before, were the main driver of food inflation and contributed 0.48 percentage points to the CPI increase of 1.6 per cent, a nine-month high, reports Xinhua.
Pork is China's staple meat and accounts for almost 3 per cent of the consumer inflation basket. Its price is subject to a boom-and-bust cycle and has been volatile in recent years.
This year, prices have been driven up as a result of a decline in the number of pigs being bred. Low prices last year and the rising price of feed left pig farmers less willing to raise pigs.
The latest price surge is bringing back memories of the 2011 inflation crisis, when pork prices pushed inflation to 6.5 per cent, its highest level in more than three years. A return of pork price inflation could bring the country's monetary easing into abeyance and undermine current efforts to support the slowing economy, but such concerns may be overstated.
China's general inflation has stayed tamed this year. The consumer price index, a main gauge of inflation, rose only 1.3 per cent year on year in the first half of 2015.
National Development and Reform Commission, China's top economic planner, said on Monday that inflation rate is likely to pick up in the second half but will remain at low levels.
Rising pork price will continue to push up China's inflation rate over the coming months, but there is no strong sign of inflation and it is unlikely to change China's easing monetary policy stance, analysts said.
The rising pork price alone should not prevent monetary easing, as the effect of rising pork prices on headline inflation will be partially offset by falling food, energy and housing prices, as well as subdued domestic demand, an HSBC report said.
Despite rising consumer inflation, producer prices in July hit their lowest level since late 2009 and have been sliding for more than three years.
Exports slumped last month and imports remained weak, adding pressure for stimulation.
HSBC expects the central bank to cut the benchmark interest rates by 25 basis points and the reserve requirement ratio to be cut by 100 basis points in the third quarter.
Joyce Liu, analyst with China International Capital Corp., also believes monetary and fiscal policy will loosen until the end of the year, and expects the consumer inflation to reach 2.3 per cent by the end of 2015.
China aims to keep its consumer inflation at around three per cent this year.
ThePigSite News Desk